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Thomas Almond
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I have been retired for over ten years. I did the online poker thing, but got tired of it after three million hands, so I have decided to take my poker bank and make a serious stab at playing with stocks. I have been in and out of the market for 15 years, but this is the first time I have ever... More
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  • GEVO: Rocket To The Moon (Part 3)

    Lest I forget let me clarify what I think is the biggest misunderstanding about GEVO

    Their biofuel product is of course isobutanol which is made from corn.

    Everyone should know that just about everything that is manufactured that we use in daily life needs some aspect of petroleum involved in its production. That includes everything from rubber (tires) to plastics. Hence the common term we always hear "petroleum products".

    What people do not understand is that in order to use oil, or petroleum to make all these products isobutanol must be extracted from the petroleum/oil.

    Gevo makes the Isobutanol without using any oil and most importantly makes it much cheaper than it costs to extract it from petroleum/oil.

    For GEVO to be successful it will never have to sell a drop of isobutanol to be used as a gasoline additive even though it can.

    There are many existing ethanol plants all over the country that are in danger of going out of business because they can't make any money manufacturing ethanol. These existing plants cost upwards of 200 million dollars to build.

    GEVO can partner with existing Ethanol Manufacturing facilities that are in danger of having to shut down by retrofitting them to produce isobutanol for roughly 40 million dollars.

    That is how they will expand fast.

    By entering in to partnership arrangements with their proprietary technology with the many existing companies with bio fuel facilities currently producing ethanol that are facing bankruptcy due to ethanol being unprofitable.

    Watch the video at this link to see how easy it is to extract isobutanol from GEVO's facilities and imagine how much more expensive and polluting it is to extract it from oil.

    http://gevo.com/about/our-business/our-science-and-technology/

    Perhaps that is the reason BP and DUPONT are so intent on trying to shut them down with these lawsuits. Think of the profits and business BP and DUPONT would lose by having a competitor who can produce isobutanol cheaper and without having to use any petroleum to do it. BP loses because its petroleum will not be needed to make everyday petroleum products and DUPONT loses because it no longer gets to extract and sell isobutanol from the petroleum it gets from BP. This last paragraph is just supposition on my part, but it makes sense.

    Disclosure: I am long GEVO.

    Mar 05 10:04 AM | Link | 5 Comments
  • GEVO: Rocket To The Moon (Part 2)

    This research paper was not easily findable in normal google searches.
    http://www.slideshare.net/ICISgreenblog/gevo-case-study

    In fact it was not easily findable at all. While it is a somewhat dated document much of it is still relevant.

    I decided to do some DD to see if I can punch holes in the authors negative criticisms about GEVO.

    This is what I came up with.

    One fact the author does not address at all is the value of GEVO's patents. It is presumable that should they continue doing as well in court as they have been that at some point they will prevail. Some of their patents are not even in dispute. Should we not assume GEVO will at some point benefit from a revenue stream from the licensing of their patents to other companies? Let us not forget that GEVO is the first company of its kind. If their business model works other companies will want to use their technology and process.

    An additional oversight the author made in my opinion was his allegation of cronyism because three of GEVO's executives are from Cargill. It appears the author was not aware of the facts below. The entire scientific technology GEVO is using rests upon Cargill's microorganism know how.

    Cargill: Cargill is an international producer and marketer of food, agricultural, financial and industrial products and services. Cargill has granted Gevo exclusive rights to integrate Cargill's world class microorganisms into its GIFT® process for the production of butanols from cellulosic sugars that are derived from biomass such as corn stover, switchgrass, forest residues and other sustainable feedstocks.
    http://gevo.com/about/our-business/partnerships-and-collaborations/

    Simply put without Cargill there would be no GEVO.

    CEO Patrick Gruber knows how difficult it is to get traditional industry to buy a "green" product. He learned that while running a unit of Cargill that made a plastic from corn, called PLA. Now, as chief executive of renewable chemical company Gevo, he's heeding the lessons from his Cargill days. "The big lesson we walked away with: Never do another new molecule," says Gruber.

    Instead, Gevo is creating an existing molecule but doing so with a different (renewable) feedstock. Isobutanol, a chemical used for solvents that has an addressable market of about 1 billion gallons a year, is currently made from petroleum. (That market estimate includes butanols for which it doesn't matter if it is isobutanol or n-butanol, Gruber says.) Gevo has been making isobutanol from corn starch in a demonstration plant; when its commercial plant goes on line in the first half of next year, Gruber says Gevo's corn-based isobutanol will be 36%-40% cheaper than the oil-based version.
    http://www.forbes.com/sites/kerryadolan/2011/05/05/name-you-need-to-know-gevo/

    Peel back Gevo, and under the hood you find a lot of Cargill, the giant ag trading and processing company that forms the "C" in the "ABCDs" that dominate global agricultural commodity trading and corn and soybean processing. That's Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus.
    http://www.biofuelsdigest.com/bdigest/2011/04/11/gevo-the-owners-manual/

    Another point the author made had to do with GEVO's growth and their seeming inability to finance it. The author completely overlooked the likely expansion model GEVO plans to use. That being collaboration with existing mills that already have the working infrastructure up and running making building additional facilities from the ground up unnecessary.

    The Gevo GIFT system - three innovations in one

    First, its magic bug (from Cargill) that indeed, produces isobutanol at a far higher rate, yield and concentration than traditional yeasts. Second, an extraction system that gets the isobutanol out of the broth before the alcohol levels kill off the yeast. Third, a bolt-on system, utilizing almost all of the systems of existing dry mill biorefineries that were producing feed grains and ethanol.

    For owners of existing mills - a higher value, lower volatility revenue stream for mill owners. For Gevo, a means of getting into business at a fraction of the cost of developing a factory from the ground up.
    http://www.biofuelsdigest.com/bdigest/2011/04/11/gevo-the-owners-manual/

    Disclosure: I am long GEVO.

    Mar 05 10:04 AM | Link | 1 Comment
  • GEVO: Rocket To The Moon (Part 1)

    Courtesy of the founder of Virgin Galactic

    I bought 1525 shares of GEVO @ $1.95 each Friday 3/1/13.

    March 5th UPDATE: I did not hear the news I was looking for in the ER. I exited my position in the after hours market at 4:40 pm and felt fortunate to be able to get $1.98 per share. I have no clue why 70,000 shares were bought in the after market at such a high gap up. I have not lost faith in GEVO. I am merely going to reassess my strategy and perform additional DD before jumping back in.

    There were more reasons for me to jump in than I have the energy to write about.

    I spent days making the decision doing DD and I tried to get in cheaper, but never got filled.

    My advice is do your DD over the weekend and get in early Monday morning; if not premarket if you are so inclined to gamble with me on this one. The catalyst (Earnings Report) is March 5th next week and it is not the profits were looking for. Profitability was never expected until 2014 anyway; and besides cash on hand is worth more than the entire float at current PPS. What we are really looking for is the announcement that they are ready to begin producing isobutonal. Now that they have won their court cases the way is clear for them to produce it. I am not going to explain all the details in this post, but rather give you the word you need to look up and understand in order to recognize the real catalyst. That word is isobutanol and they already have a $600,000 contract with the US Airforce to provide it.

    Here is an initial link to get you started with some background DD. You should recognize one of the names that is backing GEVO. None other than Richard Branson and his Virgin Green Fund.

    Read the article at this link.

    www.forbes.com/sites/danielfisher/2012/0.../

    After you read that older article go to the company website and read the news releases from both 2012 and 2013 paying particular attention to the ones referring to "winning court cases" and "favorable rulings" against BP, Dupont and Butamax over Patents. The one regarding the stock buy back program is pretty interesting as well.

    Here is the link.

    ir.gevo.com/phoenix.zhtml?c=238618&p...;nyo=0

    This trade can either be a short swing trade, or a long play. (Perhaps Both) Depends on what you want to do and what your ultimately after. As with all gambling there are no sure things. Do your own DD.

    The short interest on GEVO is over ripe for a squeeze and the longs are not only very exited and enthusiastic right now, but you will find they are out in force and determined to bust through the resistance and send the shorts into a rout.

    Seeking Alpha has the short interest float at 45.9% with over 4 days to cover. Be aware that Seeking Alpha uses a different formula and read for short interest than all the other sites. They calculate the short interest as a percentage of the total float leaving out the Institutional Investors I believe. Hence the term "short interest float" Check it out for yourself. Just be sure to add it to your portfolio on the Seeking Alpha website and then access the "Momentum" tab.

    The current Institutional Investment is over 40% of the total float in GEVO by the way.

    Disclosure: I am long GEVO.

    Mar 02 3:16 AM | Link | 3 Comments
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